More indies support Universal’s EMI deal, yet regulators still not convinced

While opposition in the independent sector to Universal’s grand plan to buy EMI has waned considerably in the last week, the mega-major is yet to win over tricky competition regulators at the European Commission, according to the Wall Street Journal.

The paper says that while Universal has proposed selling off a plethora of EMI catalogues in order to secure regulator approval in Europe, competition officials feel that, as those proposals mainly consist of the company offloading archive, the asset sale will not allay all the fears that have previously been expressed by the Commission regards the power of a combined Universal/EMI in the digital music industry.

It’s thought regulators want Universal to also commit to sell frontline label operations, and/or current artist contracts, though – the major’s negotiators say – the viability of such a commitment would depend on the wording of active contracts with current talent, which Universal execs won’t have unrestricted access to until any merger transaction is complete.

Universal says its negotiations with European regulators are ongoing. As previously reported, the European Commission hopes to rule on the mega-major’s EMI bid by September, though for the Vivendi-owned music giant meeting that deadline has become slightly less crucial.

Previously Universal was due to hand over $1.9 billion to current EMI owners Citigroup in September even if regulator investigations in the US or Europe were ongoing, the major having guaranteed to the US bank that it would receive that amount for the EMI record company even if this deal fell through, and the bankers had to sell to another party for a lesser sum (ie Universal would make up the difference).

Obviously, neither Universal nor Vivendi, nor the French conglom’s shareholders, would especially want to hand over that amount of money before the big EMI deal has been formally green-lighted. As it stands, regulators should still rule by September, and most people expect approval – even if subject to draconian terms – but still, with the regulatory process in Europe proving to be more turbulent than the major seemingly expected, having that big pay day looming so close was proving stressful.

But, according to The Guardian, the music firm has managed to negotiate a postponement of the ‘pay up whatever’ day to November, providing some breathing space should current regulator wranglings push back approval.

As previously reported, last week the independent sector in Europe, which had been resolutely opposing the deal, was split in half after Universal boss Lucian Grainge indicated via a confidential letter that, not only would he be selling large EMI catalogues to get regulator approval, but he’d commit to give the indies first-bid rights. And if pan-European indie labels trade body IMPALA supported the merger, he said, he’d also provide some cash funding for independent sector trade groups.

IMPALA hasn’t yet officially supported the deal though, but its co-President Patrick Zelnik has come out in support of Universal’s EMI bid, and claims over half of the trade organisation’s board agree with him (but the official IMPALA position can’t change without a 66% vote in favour). It’s not clear what IMPALA sticking with its opposition stance means for Grainge’s commitments to the indies, though various high profile independent label chiefs other than Zelnik have now spoken in favour of the Universal/EMI merger, subject to the proposed concessions.

Domino’s Laurence Bell told the Financial Times: “I’ve seen the concessions and I think they’re very impressive. This seems a genuine move”.

And Kenny Gates of [PIAS] added: “I’m very appreciative, despite my concerns about the merger, that he [Grainge] is making the effort. He has shown an openness to dialogue with the independent community that has never happened before”.

Meanwhile Daniel Miller of Mute, who would likely try to buy back the older Mute catalogues controlled by EMI if Universal sold them and he could find the finance, is quoted by the New York Times as saying: “Universal is already the biggest music company in the world – that’s not going to change. This is an opportunity to strengthen the independent sector. In my personal view, it would be good for Mute, it would be good for our artists, and good for the whole independent distribution network”.

Even James Palumbo, founder of Ministry Of Sound, has spoken positively of the deal, and Grainge’s proposed concessions. Palumbo’s support is interesting (even if he does call the Universal chief a “tough old bastard”), given Ministry is unlikely to want to bid for any of the EMI catalogues due to be put on the block (because of the genres), and also given that the last time a major label chief tried to woo the indie sector to secure their support for an EMI bid (in that case Warner’s Edgar Bronfman Jr), Ministry was the most vocal critic of any alliance.

Palumbo told the FT: “The last ten years in the record industry have been like the Black Death in Europe. It just halved. The record industry is a disaster and EMI’s been a double disaster. At least Lucian, whatever you think of him and whatever the detail, has got the balls to do something about that”.

Though not everyone in the indie sector has been brought round by Grainge’s letter, and the prospect of valuable EMI catalogues going up for sale to the highest bidding independents. Beggars boss Martin Mills remains vocal in his opposition, telling the FT: “Universal’s suddenly started describing itself as the benevolent patriarch of the industry, but that epiphany only happened when they decided they’d buy EMI”. Mills reckons that even with a big asset sale, a combined Universal/EMI would have too much power when it comes to digital deals and media exposure.